AB Equity's 2026 Grassroots Research Trip Day 1

Shanghai à Hangzhou

Our analysts are always traveling around in China.  We visit company factories, test firsthand new consumer products and services and of course speak with management.  But once a year, our entire research team gets together to visit companies in a couple of cities in China.  Part research, part team building, these grassroots research trips play an important role in our research process.  After all, there is no better way to understand the companies and their operating trends than actually walking the floors of factories and shopping malls.

For our 17th annual team China research trip, we will be visiting Hangzhou and Shaoxing in the prosperous Zhejiang Province along the east coast of China.  A few of us first assembled in Shanghai, which still enjoys much better international flight connectivity than Hangzhou.  We arrived into a rain-drenched city, with the familiar springtime fog and humidity of the Yangtze River Delta hanging over the skyline.  The tops of office towers disappeared into the mist, while umbrellas and reflections from neon signs filled the wet streets below.

Pudong Airport, however, felt anything but sleepy.  The terminal was busy, and the flow of foreign travelers was noticeably stronger than in the early post-COVID trips.  That is consistent with the data.  China recorded more than 150 million inbound visits in 2025, up over 17% year on year, while visa-free entries by foreign nationals have continued to surge.  With China’s economic slowdown making the country cheaper for many foreign visitors, and with visa-free entry now extended to citizens from 74 countries, tourists are gradually coming back.

Past dinner time, though, the luxury shops and glitzy malls along Nanjing Xi Road did not appear as busy as I remembered them during the go-go years of China’s economic boom.  Walk-ins for dinner were easy.  Perhaps it was the spring rain, but the roads were not all that congested either.  There can still be traffic, of course, but Shanghai traffic today feels more orderly than chaotic.  In many ways, China — or at least the more developed coastal parts of China such as Shanghai — now resembles Seoul, Tokyo or Taipei more than Mumbai, Manila or Kuala Lumpur.

That observation is important.  It is true that China’s property bubble has burst.  New home sales have declined by more than 50% from the 2021 peak, and the adjustment has weighed heavily on consumer confidence.  It is also true that the newspaper headlines about anemic consumer growth and a sluggish recovery are not wrong.  But we think this needs to be viewed in the broader context of China’s economic maturation.

Our base case remains that China is following a well-trodden path traveled by other North Asian export-driven economies — the “Asian Tigers” from Japan to Korea to Taiwan.  Light-manufacturing export growth led to FDI, urbanisation, a long boom and eventually a debt-driven property bubble.  When that bubble burst, it led to a painful adjustment period and permanently lower growth.  But growth did not disappear.  It eventually re-emerged, driven by a combination of domestic consumption and higher value-added manufacturing.

Now that I lead our Emerging Markets Value equity franchise, I spend a substantial amount of time focused on markets such as Korea and Taiwan — both of which can be volatile and certainly have been volatile year-to-date in 2026.  Yet these markets also provide useful historical parallels for China today.  Korea and Taiwan both went through difficult periods following property and industrial overinvestment cycles, only to emerge with globally dominant technology and manufacturing champions.  Today, companies from SK Hynix to Samsung Electronics to TSMC sit at the center of the global AI hardware supply chain.  Something similar is happening in China, where EV makers, renewable energy equipment suppliers and increasingly China’s own AI technology supply chain are gaining ground, both domestically and globally.  The old growth model is clearly broken.  But that does not mean there is no new growth model.

Back to the trip.  It always heartens me to see the team get together again.  Like catching up with old friends, it is always a pleasure — especially when those old friends are ready to debate property, tariffs, AI, consumer downtrading and dinner choices all in the span of a few hours.

Clients sometimes ask us how we select new members to the team.  Indeed, this year we have a new and energetic analyst who joined us just last month in April, experiencing the China trip for the first time.  We often point to trips like this one when we discuss team culture and recruitment.  Of course, we look for people with intellectual curiosity, analytical rigor and the willingness to do the hard work.  But equally important is finding people whom the entire team genuinely enjoys spending time with — because on these trips, you can spend a week together rushing through crowded train stations, sweating through factory tours, or stuck for hours on a small bus in traffic between meetings.  If a team can do that together year after year, for 17 years now, it usually means you have built a genuinely strong culture.

Stay tuned for more tomorrow, as we begin our company visits in Hangzhou.

Best,
John


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